Last Update: September 2014
Commentary on the recent development of price indices
The FAO price indices for oilseeds and vegetable oils dipped further during July and August (both falling steadily, losing some 12 percent over the last eight weeks), while the meals index, after declining in July (down 10 percent), rebounded slightly in August (up 1 percent). In historical terms, all three indices reached multi-year lows: the seed, oils and meals indices dropped to, respectively, four-, five- and two-year lows.
The slide in the oilseeds and oilmeals indices mainly reflects the tendencies prevailing in the soybean, sunflower and rapeseed markets. Regarding soybeans (which dominate the seed index), the pronounced drop in international prices – 11 percent over two months – was triggered by the prospective surge in soybean availabilities in the next few months, which is likely to persist during much of the forthcoming 2014/15 (October/September) season. In particular, a record-breaking crop is expected to be harvested next month in the United States following the highest-ever plantings together with exceptionally favourable growing conditions. In addition, current forecasts suggest a further expansion of production in South America, where plantings of the 2014/15 crop are set to get underway in the coming weeks. With record soy crops anticipated in both North and South America, global supplies should climb to an all-time record in 2014/15.
Interestingly, international soymeal quotations followed a somewhat different path: after dropping sharply in July, prices appreciated slightly during the second half of August. Apparently, during the last few weeks, meal prices appreciated on the back of a strong export pace in the United States, where old-crop availabilities have dwindled to historical lows. Furthermore, soymeal markets have been subject to spill-over effects from the feed grain sector, where prices for coarse grains firmed as a result of the on-going political tensions between Ukraine and Russia. Regarding the other oilseeds, international quotations for rapeseed weakened on reports of better-than-expected yields in the EU – although harvest delays in Canada (due to excessive rainfalls) averted a more pronounced fall. Finally, forthcoming sunflowerseed harvests are likely to exceed initial forecasts – possibly matching last year’s records in the EU, Ukraine and Russia –, which explains why sunflowerseed prices dropped markedly in recent weeks.
As to vegetable oils, palm oil has been responsible for much of the decline of the price index, even though prices of the other major seed-oils all trended downward (mirroring developments in the corresponding seed markets). In August, international palm oil quotations fared 10 percent less than in July, reaching their lowest level in five years, due to the combined effect of good production prospects in South East Asia (thanks to the reduced likelihood of a strong El Niño weather event) and lower than anticipated import demand, primarily from China and India. Strong competition from attractively priced soy and other seed-oils, a firm currency in Malaysia and weakening international crude oil prices also weighed on palm oil quotations.